When the Waters Recede

Editor’s Note: This story was originally featured in the May issue of DS News, out now.

According to the National Hurricane Center, Hurricane Harvey caused $125 billion in damage, a higher toll than any previous U.S. natural disaster other than Hurricane Katrina. Harvey damaged more than 200,000 homes in south Texas, destroyed more than 12,000 homes, and displaced nearly 40,000 people.

The Texas Real Estate Year in Review report from the Texas Association of Realtors found home sales and home prices in Texas soaring to all-time highs for the third year in a row during 2017. Texas home sales increased four percent, and the median sales price increased 6.7 percent year-over-year. But while the market might have taken less of a hit than you might expect given the enormous financial and damage impact of Hurricane Harvey on Houston and the Gulf Coast, that hit is still being felt by many of the homeowners struggling to rebuild.

“The industry is looking at different modification strategies,” said Tim Neer, Director of Loan Servicing, Colonial Savings. “We provide a great deal of forbearance to these consumers, so now they’re 90 days behind and we’re trying to figure out how to get them back on track. For the next quarter, probably quarter and a half, that’s where everybody’s focus is going to be.”

FEMA has allocated $1 billion for Texas coastal communities to put toward hazard mitigation against future storms, such as buying out flood-prone homes or repairing seawalls. But for many homeowners who watched their homes invaded by floodwaters, the recovery is much more personal, much more complicated, and often involves questions they simply don’t know the answers to.

To help answer these questions and guide these homeowners, the National Mortgage Servicing Association has partnered with HOPE NOW, an alliance between counselors, mortgage companies, investors, regulators and other mortgage market participants. According to HOPE NOW, the alliance “was encouraged by the Department of the Treasury and the U.S. Department of Housing and Urban Development to bring together diverse stakeholders to address challenges in the mortgage market and create collaborations to solve problems.”

A few weeks before Hurricane Harvey, HOPE NOW held a Housing Roundtable in Houston co-sponsored with the FDIC for nearly 100 local housing professionals. Many concerns were raised over whether the local communities in flood-prone areas were prepared for a major flood. “Unfortunately, the challenges we discussed were very evident when the hurricane hit,” said Eric Selk, Executive Director of HOPE NOW Alliance.

“The industry response from the hurricane was significant,” said Ray Barbone, EVP Bank Operations, BankUnited, and Chairman of the National Mortgage Servicing Association. “Investors, servicers, the agencies, insurers, and regulators all came together with a sense of urgency to develop appropriate solutions and programs to assist homeowners and communities impacted by the devastation of Hurricane Harvey. Notwithstanding the immediacy of the attention and collaboration of the parties, the actual assistance offerings took time to develop and roll out, some longer than others. In the end, I think the lessons learned is that the industry needs a standard set of program and solution offerings on the shelf that can be deployed and utilized upon the strike of a disaster. There will inevitably be others, and there is no reason for us to go back to the drawing board each time one occurs.”

“I think we can all agree that we need a standardized playbook that says, for any disaster that happens, here are the things we’re going to do,” said Neer. “Here are the steps we’re going to take, and here’s the timing of when we’re going to do that. It needs to feel more like a process to our customers and not a knee-jerk reaction while it’s going on.”

In February, the National Mortgage Servicing Association and HOPE NOW began hosting a series of regularly scheduled drop-in center events where hurricane-affected residents can speak to professionals to learn how best to manage their recovery and what resources are available to them. “The events focus on key issues families are facing as they go through the rebuilding process so they can walk away with confidence and feeling support on their next steps,” Selk said.

Participating mortgage servicers will include representatives from Ocwen, Wells Fargo, Mr. Cooper, Carrington, and Wells Fargo. Housing experts will include representatives from Fannie Mae, Texas Department of Insurance, and the FDIC. Attendees will receive insights into rebuilding options, available recovery and assistance programs, and how to spot and avoid scams.

Barbone said, “HOPE NOW was born out of the financial crisis as an alliance of mortgage market participants including servicers, counselors, investors, and regulators. They played a vital role in assisting millions of borrowers with staying in their homes during the crisis. It is only natural that HOPE NOW extends that same assistance to the families and communities impacted by the devastation of Hurricane Harvey. The NMSA is honored to partner with HOPE NOW in support of those efforts to assist families in need.”

“The rebuilding process can be daunting for homeowners,” Selk said. “The worst scenario is a family giving up and abandoning the property. Things get complicated for homeowners when they face multiple challenges including life planning, debt management, and rebuilding. For some families, the process may involve moving, temporary relocation, job loss, or possibly dealing with health questions. We should also consider the needs of special groups of consumers like seniors, who have limited resources and typically live on fixed income.”

What lessons are being taken away from these homeowner events? Selk says there are some patterns to be found. “Two years ago I noticed that about 15-20 percent of our clients were on a fixed income,” said Selk. “These numbers have been tracking consistently. Many families have been modified multiple times. Some participants claim to have been through the loan modification process over three times.”

Selk also spotlights the challenges presented in states with longer foreclosure timelines. “These issues beg larger questions about assistance programs and understanding the human condition. HOPE NOW advocates for streamlined solutions for all mortgage assistance products. It’s a key learning from the crisis. Program applications should be no more than two pages.”

In the end, partnerships such as the one between the NMSA and HOPE NOW will be crucial to helping homeowners affected by natural disasters to recover. However, there is still much more to be done. “The NMSA continues to advocate for standardized definitions and practices with respect to vacant and abandoned properties,” said Barbone. “We strongly believe standardization is in the best interest of all parties associated with housing, particularly homeowners and communities who suffer the effects of blight that result from a lack of such standards. Also, the lack of standards was of particular concern in the wake of Harvey where the risk of servicers being unable to remediate damage to flooded properties abandoned by uninsured homeowners increased significantly.”

“We have to focus more on assisting FHA borrowers with government-insured mortgages,” said Selk. “These borrowers have narrow margins for creative solutions, so we have to commit to good education, consistent messaging, and continuing the importance of streamlined solutions. The FHA families are also predetermined to have fewer resources, so we need to be cognizant of their status and limitations. Last year, we worked on a project focused on simplified language and paperwork. The industry collaborations and partnership have produced some helpful documentation.”

“The most important thing we can do is learn from the last ten years and improve accordingly,” Selk said.

Editor's note: The Five Star Institute is the parent company of the National Mortgage Servicing Association and DS News.

David Wharton, Managing Editor at the Five Star Institute, is a graduate of the University of Texas at Arlington, where he received his B.A. in English and minored in Journalism. Wharton has over 16 years' experience in journalism and previously worked at Thomson Reuters, a multinational mass media and information firm, as Associate Content Editor, focusing on producing media content related to tax and accounting principles and government rules and regulations for accounting professionals. Wharton has an extensive and diversified portfolio of freelance material, with published contributions in both online and print media publications. Wharton and his family currently reside in Arlington, Texas. He can be reached at David.Wharton@theMReport.com.

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